The US Supreme Court ruled Thursday that a computerized financial trading system cannot be patented because it is based on an "abstract" idea.
In a case closely watched by the tech sector for its implications for software patents, the court struck down the patents held by Australia's Alice Corp. in its dispute with a major global banking group.
Justice Clarence Thomas, writing for a unanimous court, said the patented process of assessing financial risk "does no more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer."
Thomas added that these processes "add nothing of substance to the underlying abstract idea," and as a result they are "patent ineligible."
CLS -- a trading platform used by some of the world's largest banks -- was sued for violating the Alice patents in a system that assesses the financial risks of daily exchanges to ensure against losses.
The platform was backed by the US government and some key tech firms, including Google and Facebook. But IBM and other companies in the sector supported Alice Corp., fearing an adverse ruling could discourage research.
Alice Corp., which commercializes its risk-hedging systems for traders, claimed that an unfavorable ruling could put thousands of software patents at risk.
But others said the courts were being clogged by "patent trolls" that seek to monopolize generic ideas and extract royalties from them.
The Computer & Communications Industry Association, a trade group that includes Google, Yahoo and Facebook, welcomed the ruling as well-crafted.
"The court has found that taking an idea and implementing it on a computer does not deserve a patent. This is a sound decision ensuring our patent laws are better aligned with the original intent of our founders," said CCIA's Ed Black.
"The justices interpreted the law in a way that will cut back on some flimsy patents without impacting more deserving ones. Better quality patents will help curb the patent troll problem."
- Narrow ruling -
Patent lawyer Gene Quinn wrote on the IP Watchdog blog that the "breathtaking" decision could mean that even the IBM Watson supercomputer might not be patent eligible.
But Adam Mossoff, a George Mason University law professor, said the court's ruling was narrow enough to steer clear of many other software patents.
"Thus, innovative software inventions in the high-tech industry are now definitively deemed patentable, contrary to the claims of many patent skeptics today," he said.
Patent attorney Jennifer Spaith said the court "failed to articulate a broader standard for how to identify an unpatentable 'abstract idea.'"
"The Supreme Court did not offer tools for identifying patentable subject matter in these other intangible areas, so patentees will continue to battle uncertainty in these spaces," Spaith said.
Florian Mueller, who writes the Foss Patents blog, said that the opinion was "narrowly focused on issues that relate to abstract ideas such as business methods and does not provide any guidance with respect to the patent-eligibility of technical inventions involving software.